Sunday, October 30, 2016

Here is a summary and some personal reflections of the ASM International 3Q/2016 earnings call (Full version at SeekingAlpha)
having the ALD binoculars on, as always. In any, case nothing else than
ALD was discussed and the main focus was on single wafer ALD and not
batch furnace directly. There was however an interesting question from
ING on the rumors that ASM will place an offer on Hitachi Kokusai, which
Chuck del Prado declined to comment on other than in general terms that
ASM has an organic growth strategy and will take opportunities if they
give long term growth and therefore share holder value.

My
take on this is that we know ASM has made very successful acquisitions
in the past, i.e., Microchemistry Oy Finland (ALD technology) and
Genitech South Korea (PEALD) and both acquisitions have become crucial
fundaments to ASM ALD domination today. However, ASM has not been that
successful in ALD Large Batch business, which is dominated by Tokyo
Electron and Hitachi Kokusai.

Kokusai also have Batch
SiGe Epi process which could add to the ASM Epi business. Based on this
it makes sense for ASM to acquire Kokusai. Timing is also good since it
is also for sale and ASM has a lot of cash so it is very interesting
times. However, you can imagine that also other OEMs are interested in
Hitachi Kokusai so let´s see what the outcome will be.

Over
to the call - ASM International President and CEO Chuck del Prado
reported that as usual the ALD business was again the main driver in the
third quarter. The revenue was led by foundry, followed by memory
(3DNAND & DRAM) and not so much by logic, which decreased compared
to 2Q/2016. The driver for in foundry and logic was driven by 10 nm
investments taking place and in memory there was a drift from DRAM
towards 3D NAND.

Foundry & Logic

The transition to 10 nm shows an increase
in the number of ALD layers for which ASM has been been claiming
additional business as compared to the previous 14 nm 16 nm generation.
ASM expect to book record revenue in the foundry segment this year
compared to previous years.

Memory

Following strong spending levels in 2015 DRAM the
spending went down substantially in 2016. A recovery in DRAM spending
has been pushed out and is not expected to occur before mid 2017. The
key driver will then be the 1X technology node (Samsung, Hynix and
Micron).

For NAND flash that is in transition, the
single wafer ALD market and customer spending in NAND flash has shifted
from planar NAND to 3D NAND. As a consequence the multiple patterning in
planar NAND has close to disappeared by now.

For 3D
NAND Chuck del Prado announced that ASM has booked multiple XP8 tool
orders for a number of ALD applications in the third quarter and ASM
expect double digit growth in the 3D NAND single wafer ALD market in
2017.

For Xpoint (Intel & Micron) ASM announced
that they have a R&D engagement for quite some time and are ready
for the that market to take off.

Eagle
XP8 is a high productivity 300mm tool for PEALD applications. The Eagle
XP8 PEALD system can be configured with up to four Dual Chamber Modules
(DCM), enabling eight chambers in high volume production within a very
compact footprint. (www.asm.com)

Future outlook of the ALD market

ASM
maintain their forecast that the single wafer ALD
market will show a double digit percentage decline in 2016. As explained
above due to a significant drop in the memory segment, both in the DRAM
and in NAND
flash. The drop is only partially offset by a substantial increase in
the
logic/foundry segment, i.e., 10 nm investments.

For
2017 ASM expectation is that the (single wafer) ALD market will improve
due to growthin logic/foundry and 3D NAND applications. However, DRAM
spending will come later (mid 2017).

"... the longer term outlook for the single wafer ALD market, the
outlook for structural growth remains strongly driven by miniaturization and
the introduction of new materials and new complex device architectures. We
still estimate that these markets, this market to double by the 2018, 2019
timeframe. Given the decline in the market in 2016, it is more likely that this
will happen in 2019 than in 2018." - Chuck del Prado

Chuck del Prado summarized the growth drivers in single wafer ALD to:

Complexity and low temperature requirements of
advanced FinFET structures drive a strong increase in new ALD applications and
layers.

ALD-based multiple patterning is a key enabler of the 10 nanometer
transition and also the 7 nanometer node in logic/foundry, and the transition
from 14/16 nanometer to 10 nanometer and 7 nanometer, over a multiyear period,
will expand the single wafer ALD served available market in logic/foundry to
more than double in total.

In DRAM, we expect multiple patterning to remain a steady contributor for the
coming technology transition.

In NAND, from a lower base in 2016, we foresee a
steady increase in the number of single wafer ALD applications as customers
transition to next generation higher stack 3D NAND devices in the coming years.

During
the questioning at the end of the call Chuck del Prado reassured the
statement form earlier that the the more than doubling in ALD growth is
the transition from 16/14 nm to 10 and 7. I assume he also include the
single wafer opportunities in 3DNAND and the 1x nm DRAM invest up ahead.

For
us ALD R&D guys it would mean that we would need to increase our
R&D effort all the same and plan for >1600 delegates at the next
European ALD conference 2020 as ALD2016 Ireland had 811 delegates - or
has ALD transitioned form a technology push to a Industry pull already
some years ago?